The Nikkei was off its 7-year closing high this morning. The weakness in the market (not shown in the chart) was associated with a decline in real estate stocks, which are sensitive to rising interest rates. The labored pattern you see in the chart is called an ending diagonal. Once finished, it should completely retrace all the gains as its first order of business. I am currently neutral in the Nikkei.

Stocks fell in Asia, paced by the Shanghai index. (Today’s market data not shown.) The inability of this index to achieve its May highs is notable. The index fell last night by 3.3% last night and may have set another decline in motion. Just as the Japanese markets were affected by rising interest rates, so too were the Chinese.

In the last major decline, the weakness in Shanghai sparked a world-wide decline. Today it appears that the trouble with Bear Stearns has re-awakened the concept of risk here in the United States. Wall Street is having rates jitters. "There's lots of volatility in the market right now," said Mike Malone, trading analyst at Cowen & Co. "More than anything, it's concerns with what's taking place in the credit markets with all the issues about hedge funds and subprime mortgages."

The chart pattern says, “No.” There may be even more volatility ahead next week since there will be a lot of market-moving news, including a U.S. treasury auction. It will be hard to separate the “noise” from the real news as some investors move into treasury bonds for a safe haven while the subprime market blows up.

The housing market is searching for new lows again.

They could be much lower than people expect. Economist Marc Faber weighs in with his comments, “My view would therefore be that the coming housing slowdown or slump could actually significantly exceed expectations and lead to across the board economic weakness. Don't forget that if home prices no longer appreciate, home equity extraction will come to a halt.

The consumer will then likely have to begin saving again from current income. Both these factors would obviously depress consumption and retail sales. One more point! The weak sales growth at Wal-Mart seems to confirm that the typical US household is already struggling.”

I have commented several times in the past that once the dollar moves solidly above its 50-day moving average, it will re-test the 50-day for support. This is pat of the stair-step process that all indexes use to maintain their advances. Today, the dollar is at its 50-day average (not shown). Once it finds support (hopefully, today) it may re-start its advance toward the next hurdle, the 200-day moving average.

Gold prices declined for the second straight session Thursday as the dollar strengthened and bond yields extended their rise. The competition for investors’ money heightened as interest rates have begun to appear more favorable than they have for almost a year. The common complaint about precious metals is that they pay no dividends, as bonds do.

…but international news is still driving the markets. The EIA's report on Wednesday that showed crude inventories jumped by 6.9 million barrels in the week ended June 15 lent some support to prices. Analysts had expected crude stocks to drop by 150,000 barrels. Gasoline inventories rose by 1.8 million barrels, more than the 1 million-barrel increase expected by analysts surveyed by Dow Jones Newswires.

June 22 (Bloomberg) -- Natural gas in New York fell to a three-month low as adequate storage eased concern over potential supply shortfalls later this year and as analysts forecast lower prices.

Prices have broken through ``hard'' on the 200-day moving average (not shown) of about $7.18, suggesting $7 and then $6.80 are the next lows to be tried out by traders, Fitzpatrick said.

The trader’s view is correct. Once the 200-day moving average is broken, a commodity such as natural gas is in the bear’s lair.